The logo of Huawei is pictured at a mobile phone shop in Singapore. Picture: Edgar Su/Reuters
The logo of Huawei is pictured at a mobile phone shop in Singapore. Picture: Edgar Su/Reuters

How Huawei landed in middle of a global tech fight

By Bloomberg Time of article published Aug 20, 2020

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By Bloomberg reporter

China's biggest tech firm, Huawei Technologies, has risen to global prominence as a leader in 5G, the much ballyhooed, next-generation wireless technology. It's also become a major target for the U.S., which has been trying to convince its allies to ban Huawei equipment from their national networks on spying concerns. In a major reversal, the U.K. decided in July to join the boycott, signaling fresh momentum for the American effort. Underlying the wrangling is the question of which country will take the lead in the nascent, "everything-connected" era, and who gets left behind.

1. Why does the U.S. have an issue with Huawei?

U.S. government officials say Huawei is dangerous in part because it could use its growing share of the telecom equipment market to spy for the Chinese government. Already in 2012, a report by the U.S. House Intelligence Committee tagged Huawei and ZTE as potential security threats; the Federal Communications Commission designated them as such this year, a step toward driving them from the U.S. market. Concerns about Huawei drove the 2018 decision by President Donald Trump to block a hostile takeover bid from Broadcom, based at the time in Singapore, for the U.S. chipmaker Communal. The deal could have curtailed American investments in chip and wireless technologies and handed global leadership to Huawei. Such concerns have grown as carriers begin to spend billions of dollars on new 5G networks, which will collect data and enable services on an unparalleled scale.

2. How important is Huawei?

In just over three decades it's grown from an electronics re-seller into one of the world's biggest private companies, with leading positions in telecommunications gear, smartphones, cloud computing and cybersecurity, and substantial operations in Asia, Europe and Africa. Huawei generated 850 billion yuan ($122 billion) in sales in 2019 -- more than Boeing. It's plowed billions of dollars into 5G and broke into the top 10 recipients of U.S. patents last year. It has helped build 5G networks in more than 10 countries and expects to do the same in another 20 in 2020. U.S. sanctions spooked some Huawei customers and suppliers globally, while Chinese consumers and carriers rallied to its side.

3. Why is its equipment a security issue?

The U.S. government -- like the Chinese and others -- is wary of employing foreign technology in vital communications for fear that manufacturers could install hidden "backdoors" for spies to access sensitive data, or that the companies themselves would hand it over to their home governments. U.S. Secretary of State Michael Pompeo has said the U.S. might hold back intelligence-sharing with NATO allies if they use Huawei equipment, a threat met with some skepticism. The 5G networks are of particular concern because they will go beyond making smartphone downloads faster. They also will enable new technologies like self-driving cars and the Internet of Things. U.K.-based carrier Vodafone was said to have found and fixed backdoors on Huawei equipment used in its Italian business in 2011 and 2012. While it's hard to know if those vulnerabilities were nefarious or accidental, the revelation dealt a blow to Huawei's reputation.

4. Who's using Huawei and who's not?

Japan and Australia are among a handful of places that have joined the U.S. boycott. The U.K. will prohibit its telecom operators from buying Huawei equipment starting next year, and equipment currently installed must be removed by 2027. Countries such as India and Vietnam are considered unlikely to use Huawei. But the company has won 5G customers in Russia, the Middle East and Asia, including the Philippines and Thailand. Its equipment tends to be less expensive than alternatives from Nokia and Ericsson and is often higher quality. In Malaysia, the prime minister has said his country will use "as much as possible."

5. What's going on elsewhere?

Norway decided against a ban, leaving the choice to individual companies; so far two have gone with Ericsson. Huawei lost two big contracts in Singapore this year but still has a foothold in the market. In the European Union, there are signs of a coordinated balancing act. German Chancellor Angela Merkel is grappling with a potential revolt by lawmakers who want to effectively ban Huawei equipment. China's ambassador to Germany threatened Berlin with retaliation if such a ban were adopted, citing the millions of vehicles German carmakers sell in China. Brazil has said it isn't excluding anyone from bidding.

6. What else has the U.S. done?

The U.S. has moved to curb Huawei's ability to sell equipment in the U.S. and, more significantly, to buy parts from U.S. suppliers, by adding Huawei to a Commerce Department blacklist in 2019. Accusing the company of seeking to "undermine" those export controls, the department in May imposed further restrictions on chipmakers using American gear in designing or producing semiconductors, meaning suppliers such as Taiwan Semiconductor Manufacturing will have to cut off Huawei unless they get a waiver from Washington -- or potentially face penalties. Further measures were introduced in August, blacklisting 38 Huawei affiliates in 21 countries, amid mounting tensions between the U.S. and China on multiple fronts. In 2019 the FCC prohibited the use of federal subsidies to buy equipment made by Huawei and ZTE and said it would consider requiring carriers now using the products to remove them.

7. What's going on in Canada?

In December 2018, at the request of the U.S., Canadian authorities arrested Huawei's chief financial officer, Meng Wanzhou, who's also the daughter of the company's founder, Ren Zhengfei. The U.S. is seeking her extradition as part of a criminal case alleging that she conspired to defraud banks into unwittingly clearing transactions linked to Iran in violation of U.S. sanctions. Both Meng, who is also deputy chairwoman, and the company have denied wrongdoing. Canada is still deciding whether to allow Huawei to play a bigger role in developing 5G.

8. Who else has accused Huawei?

In 2003, Cisco Systems sued Huawei for allegedly infringing on its patents and illegally copying source code used in routers and switches. Huawei removed the contested code, manuals and command-line interfaces and the case was dropped. Motorola sued in 2010 for allegedly conspiring with former employees to steal trade secrets. That lawsuit was later settled. In 2017 a jury found Huawei liable for stealing robotic technology from T-Mobile US, and on Jan. 28, 2019, the Justice Department indicted Huawei for theft of trade secrets related to that case. The same month Poland, a staunch U.S. ally, arrested a Huawei employee on suspicion of spying for the Chinese government. Huawei fired the employee and denied any involvement in his alleged actions.

9. What does Huawei say?

That U.S. restrictions are not about cybersecurity but are really designed to safeguard American dominance of global tech. It has repeatedly denied that it helps Beijing spy on other governments or companies. But bracing for continued pressure, it outlined plans to shake up its management ranks as revenue growth slowed. The company, which says it's owned by Ren as well as its employees through a union, has in recent years begun releasing financial results, spent more on marketing and engaged with foreign media in an effort to boost transparency. Ren has become more outspoken as he fights to save his company. While he said he was proud of his military career and Communist Party membership, he rejected suggestions he was doing Beijing's bidding or that Huawei handed over customer information. In March 2019, Huawei went on the offensive, filing a lawsuit in federal court against a statute that blocks U.S. government agencies from using its equipment.

10. Are other Chinese companies feeling the heat?

Yes. In October, the Trump administration placed eight other Chinese tech giants on its blacklist, accusing them of being implicated in human rights violations against minority Muslims in the country's Xinjiang region. They included Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology, which by some accounts control as much as a third of the global market for video surveillance; SenseTime Group, the world's most valuable artificial intelligence startup; and fellow AI giant Megvii Technology. ZTE almost collapsed after the U.S. Commerce Department banned it for three months in 2018 from buying American technology. The U.S. Justice Department has charged state-owned Fujian Jinhua Integrated Circuit, its Taiwanese partner and three individuals with conspiring to steal trade secrets from Micron Technology. In August, Trump issued a pair of executive orders banning U.S. residents from doing business with the popular Chinese-owned apps TikTok and WeChat on national security grounds.


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